"Demand is expected to be very strong for all of 2010," Chief Executive Shawn Qu said in a statement. "In the first quarter of 2010, we are expecting shipments growth over the fourth quarter of 2009 with further sequential shipments growth in the second quarter."

The company's shares were up 3 percent at $20.88 Wednesday morning on Nasdaq.

Canadian Solar has joined a growing list of Chinese solar companies to have signaled a pick-up in demand, after a difficult 2009, when the global credit crisis dried up financing for new projects and panel prices plummeted.

The company, which is incorporated in Canada and has manufacturing plants in China, said shipments in the fourth quarter rose to 155.5 Megawatts (MW), from 19.6 MW a year-ago.

In 2010, Canadian Solar expects shipments growth in 10 core countries including Germany, where it said it will witness higher exposure in the first half of the year.

The German government plans to cut state-mandated incentives, called feed-in tariffs -- for rooftop solar power by 16 percent from July 1 and eliminate support for converted farmland, parliamentary sources told Reuters. [ID:nLDE61M17K]

Market analysts have said much of the current demand comes from developers seeking to start projects in Germany, the world's largest market, ahead of planned cuts to energy incentives there around the middle of the year. [nN23114827]

Feed-in tariffs -- prices utilities are obliged to pay to generators of renewable energy -- are the sector's lifeline as long as grid-parity, the point at which renewables cost the same as fossil fuel-based power, has not been reached.

SEES MARGINS RISING

The company posted a net income for the fourth quarter was $14.9 million or 35 cents a share, compared with a loss of $49.2 million, or $1.38 a share, in the year-ago quarter.

Revenue soared 317 percent to $287 million, after results in the year-earlier quarter were hit by rapid price declines and shrinking funding for solar projects.

Analysts on an average were looking for earnings of 45 cents a share, before items, on revenue of $267 million, according to Thomson Reuters I/B/E/S.

On Feb. 19, the company said margins were hurt by higher processing costs and lower yields, and due to defective production equipment at its new ingot and wafer plant. [ID:nSGE61I0F7]

However, the company said it is on track to improve the yield of its newly ramped up ingot and wafer facility and expects a positive margin contribution in the second quarter.

"For the second half of the year, we expect the improved cost structure to result from both lower processing costs and from increased internal cell capacity," CEO Shawn Qu said.

For the alerts, double click [ID:nWNAB4575] (Reporting by Arundhati Ramanathan in Bangalore; Editing by Mike Miller and Unnikrishnan Nair)